What is a Ghost” Tax Preparer?
Some taxpayers are a bit savvier than the average person and take great pains in selecting their tax preparer. They look at credentials, experience, reviews, and the cost of tax preparation. Other folks might strictly be interested in the cheapest price for tax preparation and due very little due diligence. Regardless of your approach to selecting a tax pro, it is vital that you be smart about checking the legitimacy of whoever prepares your taxes. Why? “Ghost” tax return preparers.
By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number (PTIN). Additionally, paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.
These unethical “ghost” tax preparers don’t sign tax returns for their clients. They simply print out the return and tell the taxpayer to sign and mail it in themselves. If it’s an e-filed return, the ghost still doesn’t follow protocol and refuses to digitally sign as the paid preparer.
When this happens, the IRS’ sees the return was self-prepared, and the ghost tax preparer remains undetected. Tax preparers will sometimes promise a large refund and charge the taxpayer a preparation fee based on a cut of that return, which is illegal.
Here are some other things that ghost tax return preparers may do:
- They ask to be paid in cash and will not offer a receipt.
- They cook the books a little, coming up with some faux income, so the client qualifies for a tax credit.
- They claim fake deductions as a way to pump up the amount of the refund.
- They direct the tax refund to go to their bank account instead of the client’s. The IRS says some taxpayers gloss over the bank routing number and miss the diversion altogether.
Be aware that both the IRS and state tax agencies have shown little compassion to taxpayers when they are ghosted.
For some tips on hiring the correct tax preparer, check out the blog, Hiring a Tax Preparer? Here are some tips –
Bottom line – review your tax return carefully and be cautious of who prepares and signs your return.